Redistributional Consequences of Community Rating

Published In: Health Services Research, v. 32, no. 1, Apr. 1997, p. 71-86

by Dana P. Goldman, Arleen Leibowitz, Joan L. Buchanan, Joan Keesey

Read More

Access further information on this document at

This article was published outside of RAND. The full text of the article can be found at the link above.

Medical underwriting can lead to higher premiums for the chronically ill, a situation that has spurred proposals mandating community rating. This paper combines data from the 1990 U.S. Census, price data from Blue Cross, and a simulation model based on the Health Insurance Experiment data to estimate health expenditures for a large statewide sample of Californians. The authors show that rural residents spend less than do urban residents, and even within urban areas, residents of wealthier parts of town spend more than those living in poorer parts of town. Mandated community rating would therefore result in substantial transfers of money from poorer and rural communities to urban and richer ones. Allowing premiums to be adjusted for regional costs of medical care would eliminate some of the transfer without sacrificing the benefits of community rating.

This report is part of the RAND Corporation External publication series. Many RAND studies are published in peer-reviewed scholarly journals, as chapters in commercial books, or as documents published by other organizations.

Our mission to help improve policy and decisionmaking through research and analysis is enabled through our core values of quality and objectivity and our unwavering commitment to the highest level of integrity and ethical behavior. To help ensure our research and analysis are rigorous, objective, and nonpartisan, we subject our research publications to a robust and exacting quality-assurance process; avoid both the appearance and reality of financial and other conflicts of interest through staff training, project screening, and a policy of mandatory disclosure; and pursue transparency in our research engagements through our commitment to the open publication of our research findings and recommendations, disclosure of the source of funding of published research, and policies to ensure intellectual independence. For more information, visit

The RAND Corporation is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors.